Business Model Key to E-Commerce Survival

Nov 30th 2000

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As anyone knows who follows the demise of Internet-based businesses, more often then not, these failed companies did not have a solid infrastructure, hired too many people too quickly or generally lacked customer service skills to get the job done right.

A solid business model should be the number one objective, according to CFO Paul Williams of Cyberian Outpost, a vendor of software, hardware and electronics. He has re-engineered the company's strategy, and is focusing on lowering the cost of acquiring new customers, improving relationships with suppliers, and guaranteeing customers good service.

These are all solid initiatives, but will they work? At least in the short run, Williams realizes that one of the business models that does not work is selling below cost. Too many Internet-based companies get into trouble when they sell items or services below cost, hoping to make up the difference with ad revenue.

As mentioned above, one of the other key components of the solid business model for Williams is to find a way to decrease the cost of finding new customers. Since August of this year, his company has been able to cut the cost of acquiring a new customer from $100 to $38.